INTERVIEW: Gem

How does the Gem of 25 years ago differ from the Gem today?Chris Peacock: We started off on a marketing stall selling games from the back of a lorry, now we’re a £400-plus million group. From that point of view, there’s no real comparison between the two businesses. We’re part of a significant group of businesses called DCC, which is something in excess of £6 billion annual turnover.

Dean Van-Velsen: When Gem started, we knew we were in an exciting industry that was going to grow and become something. But no one here could have imagined that the video games industry would turn into anything of the size that it has – or we would play such a significant role in that. One of the things we capitalised on very quickly was the PC market. That really was the start of the growth.

What was it about the environment you began in that meant the business could grow so quickly?CP: [Gem chairman] Paul Donnelly very much saw the opportunity and went for it. There was absolutely a degree of luck, but he exploited a chance that was booming at the time. It just goes to show that if you have a solid business model to begin with and the desire, ambition and skills to exploit it, you can make a multi-million pound business.

Could anyone do it today? I think it would be an awful lot more difficult. Look at the indie businesses that have come and gone in the last decade: the ePlays, Software Stores and dozens of others. There are very few that have gone from indie to chain to something bigger and stronger. It’s a hell of a lot more difficult than it was 25 years ago.

DVV: If you look back at those times, it was a pioneering era. You were often the first company to do something. Today you don’t have that luxury. In those days, you didn’t know what the limitations were. Today, you would have difficulty because it’s not a new market – there’s competition everywhere. It was a real moment in time.

Pinnacle, Jack Of All Games, EUK, Andromeda and Just have all fallen by the wayside in the distribution sector. What’s kept Gem so successful?CP: MCV did a front page story years ago, and the headline was, ‘Evolve or die’. The reality is that as a business, Gem has absolutely evolved. We’ve evolved away from just video games and just independents into other sectors and areas, brand areas, the development Gem created when Gem Logistics started – it’s all about evolution.

Which single achievement are you most proud of after 25 years?CP: Still being here. In view of the people that aren’t, I think that’s a massive achievement considering where we’ve come from. The number one is really maintaining the relationship we’ve had with Microsoft for 21 years now. To be Microsoft’s sole UK

Xbox distributor and their longest-standing PC software and peripherals distributor in the UK is testament to the job we do for them.

Simon Lee: Each of those bits of business has had to be won by a tender process. Nothing was awarded to us, or given because we were already an incumbent. That’s something to be very proud of, I think.

What has kept those relationships so tight-knit?DVV: It’s never been about what Gem wants to achieve. It’s about what our customers and suppliers want to achieve and – our flexibility in meeting those needs.

CP: We’ve opened up new areas of opportunities for our partners, into areas like catalogues, convenient credit stores and mobile phone retailers. There are significant accounts we trade with today that we didn’t this time last year, let alone ten years ago – and they’re starting to take bigger and bigger shares of the retail market. That’s one thing we’ve really delivered. We’re always aggressively looking for new customers and opportunities. We do it so they don’t have to.

Any plans for new partnerships with games publishers?CP: We’re always in discussions with people. The video games market is still a very important one to us. The relationship we have with our exclusive partners – Xbox, Take Two, Codemasters and Zoo Digital – is very important. Of course we would like to add more publishers to that, but it would have to be on the right terms that make it viable for both parties.

The mix between primary and secondary distribution would also have to be right to make it attractive. The one thing we’ve noticed over the last ten years is how more publishers are going direct to more customers. You get models where maybe only two to three per cent of their business is done on a physical buy/sell basis – the rest is done on primary distribution terms.

That’s not an area we’d be overly keen to get involved in. PDQ already does a great job in that primary distribution space.

What would you say was the biggest launch of Gem’s history?CP: We did the primary and secondary distribution for the UK and a number of other European territories for Xbox 360. It was absolutely massive. In terms of workload, we’d never seen anything like that before.

So physically that was definitely the biggest product launch ever. It was challenging because of the scale and the timescales involved, but we overcame it and it was a great success. Dreamcast was big, Xbox was bigger and Xbox 360 was even bigger.

SL: The GTA release meant moving over one million units in 24 hours. And the strangest thing was that it was like it wasn’t happening. It all went so smoothly. We brought all of the staff in on the days around launch, expecting problems. And the phones just didn’t ring. Where do you see the Gem business in another 25 years?CP: In the last three years, we’re now not just a UK-based distribution business. We’re a UK-based distribution business with a UK logistics facility and a UK creative studio. We have a UK brand, a UK and European brand with Exspect and our first European venture with Banque Magnetique.

In its own right that will be a €200 million business in France. In five years time, I see us having built the Expect brand so that it’s got half a dozen sub-brands within it; we already have Exspect distribution in Europe and the Middle East and we’re looking into distribution into Australia, North America and Asia. Our move into distribution in France is the first step of Gem’s European expansion strategy.

We’re looking at a couple of other acquisition opportunities in other territories. Then you look at the current economic climate, opportunities will arise for us to acquire businesses that we could get for a very good price. I wasn’t envisaging us in North America just yet, but beyond that, who knows.

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MCV is the leading trade news and community site for all professionals working within the UK and international video games market. It reaches everyone from store manager to CEO, covering the entire industry. MCV is published by NewBay Media, which specialises in entertainment, leisure and technology markets.